WASHINGTON – Dwight Hughes understands why politicians keep hitting up his customers at his Brooklyn, Ohio, tobacco store to pay for ballparks, basketball arenas, arts programs and all sorts of other good things.

Higher cigarette taxes have the virtue of raising big bucks for government without infuriating most people who vote, he knows, and they have the added benefit of discouraging smoking.

But as Congress considers slapping yet another steep tax increase on smokers, on top of the 30-cent-a-pack hike on cigarettes that took effect in Ohio’s Cuyahoga County this year, Hughes says he’s not just “totally disgusted.” He’s also mystified at how far politicians think they can go.

“They’re getting to the point,” he warns, “where they’re going to have to tax something else because there’s not going to be any revenue from it. It’s just a matter of time.”

Cigarette carton sales at his business already have plummeted from more than 2,200 a week 12 years ago to about 600, he says. Over that period, Ohio has raised state taxes from 24 cents a pack to $1.25.

Now comes Congress, hoping to raise federal taxes on tobacco to pay for a major expansion of a program that helps states provide health coverage to uninsured children.

The Senate this month passed a bill that would raise federal taxes on a pack of cigarettes from 39 cents to $1 – a 61-cent jump. The House passed a 45-cent increase. A compromise has yet to be worked out, but the final bill is almost certain to include a large tax increase on cigarettes and other tobacco products.

“It’s absolutely ridiculous,” says Hughes. “It just seems that enough is enough.”

Critics of tobacco tax increases have long complained that they disproportionately hurt the poor and unfairly single out a small group of people to pay for programs that benefit everyone.

But as tax increases and initiatives like Ohio’s new smoking ban proliferate, opponents increasingly are focusing on a more pragmatic argument: There is a limit to how much smokers will bear, they say, before government discovers that there won’t be many smokers left to tax.

Nobody seems to dispute the premise that the more government taxes smokers, the less people smoke. The Congressional Budget Office estimates that every 10 percent increase in the price of cigarettes reduces smoking between 2.5 and 5 percent – mostly from people quitting, but partly from people cutting back.

While the federal government would reap tens of billions of extra dollars from a large federal tax increase on tobacco, collections would gradually decline over the years as people smoke less, the Congressional Budget Office predicts.

For states, however, a large federal tax increase would pose an immediate revenue problem, because their tobacco tax collections are likely to drop as smokers quit or cut back in response to the federal tax hike.

Federal figures show smoking has declined substantially in recent years in Ohio. The percentage of adults who say they currently smoke has fallen from 27.7 percent in 2001 to 22.5 percent in 2006, according to the Centers for Disease Control. Nationally, 20.9 percent of adults smoked in 2006, CDC figures show.

Ohio Sen. George Voinovich, one of only 31 senators to vote against the children’s health insurance bill, said one of his main complaints was its reliance on tobacco taxes. Voinovich, a Republican who prides himself on being a fiscal hawk, contended it’s irresponsible to finance a major program with a tax that’s likely to bring in less and less money over time.

Supporters of tobacco tax increases say the prospect of declining revenue is hardly a reason to avoid such hikes. They say that the advantages of reducing smoking outweigh any financial harm and that it makes perfect sense to tax an unhealthy practice to pay for improvements in health coverage for children.

Sen. Max Baucus, chairman of the committee that wrote the Senate bill, argued in a letter to the Bush administration – which opposes the bill – that reducing smoking will save lives as well as health costs.

“I view the cigarette tax increase as a health measure in and of itself,” the Montana Democrat wrote.

(OPTIONAL TRIM BEGINS)

Back in Ohio, Hughes – who doesn’t smoke – says politicians should simply ban smoking if they’re so concerned about people’s health, rather than continually raising taxes on smokers. But he doesn’t expect that to happen anytime soon because he said he thinks politicians are hooked on the money they get from smokers.

So for now, he’s fighting back not only with petitions but also with creative marketing. When the Cuyahoga County tax on cigarettes jumped last winter, he says, he came up with a plan.

He began displaying machines that allow people to make their own cigarettes by injecting bulk tobacco – which isn’t taxed nearly as heavily as manufactured cigarettes – into tubes. And he showed his customers, most of whom, he says, have modest incomes, how to use them.

“I’ve got 70-year-old women making their own cigarettes, when they wouldn’t have thought of doing it before,” he says. “They’re addicted. So they’ve got to have their smoke. That’s their only way to save money.”

CM END AUSTER

(Elizabeth Auster is a senior writer in the Washington bureau of The Plain Dealer of Cleveland. She can be contacted at eauster(at)plaind.com.)

2007-08-22-CIGARETTE-TAX

AP-NY-08-22-07 1453EDT